Page 4 - GLNG Week 17 2021

GLNG COMMENTARY GLNG

Mozambique LNG on hold

Total has issued a declaration of force majeure on its Mozambique LNG

project, citing deteriorating security conditions in Cabo Delgado Province

PROJECTS & FRANCE’S Total has issued a declaration of recent events would have “a consequence” for
COMPANIES force majeure on the Mozambique LNG project, the Mozambique LNG work schedule.)
citing deteriorating security conditions in Cabo Meanwhile, the problems are not con-
WHAT: Delgado, Mozambique’s northernmost province. fined to the onshore construction site. Car-
The French major has In doing so, it signals that its attempts to restart los Zacarias, the chairman of Mozambique’s
suspended work at work on the project have come to an end – at National Petroleum Institute (known locally as
the site of its onshore least for now. INP), was quoted by Upstream as saying earlier
complex on the Afungi In a statement dated April 26, the company this week that Total had also stopped work on
Peninsula. confirmed that it had withdrawn all project the upstream portion of the project – namely,
personnel from the site on the Afungi Penin- preparations for gas production at Golfinho and
WHY: sula where it is building an onshore complex Atum, two fields within the offshore block des-
Total had hoped to and natural gas liquefaction plant. It expressed ignated as Area 1.
resume work in late “solidarity with the government and people of According to Ian Simm, principal advisor at
March, but has been Mozambique” and said it hoped that “the actions the IGM Energy consultancy, delays are prob-
stymied by a series carried out by the government of Mozambique ably inevitable under current circumstances.
of attacks on local and its regional and international partners will “The declaration of force majeure eases the
communities. enable the restoration of security and stability in strain on the Mozambique LNG partners, paus-
Cabo Delgado Province in a sustained manner.” ing the drawdown of debt and freezing contracts
WHAT NEXT: Total has not said when it might resume work for associated development works. This will be
Mozambique LNG may on the LNG plant, which will eventually have of little consolation to contractors, as the part-
have to postpone the two production trains capable of turning out ners are likely to be freed from certain contrac-
start of production by at 12.88mn tonnes per year (tpy). A spokesman tual obligations and may eventually cancel deals,
least a year. for the French major informed Upstream earlier depending how long force majeure remains in
this week, though, that the declaration of force place,” he told AfrOil earlier this week. “Export-
majeure would not be lifted until Mozambican ing gas by the late 2024 target now appears to
authorities succeeded in restoring “safety and be unlikely, and financiers will need to recalcu-
stability in a verifiable and sustainable manner.” late their anticipated returns. Much will depend
According to the spokesman, Total took this on how quickly the security situation can be
step because it has not been able to operate safely improved, but with several militant groups
or efficiently since late March, when Ahlu Sun- appearing to have joined forces, matters have
nah Wa-Jamo (ASWJ), an Islamist group with become more complex.”
ties to Islamic State (Daesh), mounted a series Despite these
of vicious attacks on Palma and other villages Total not exiting Mozambique
near the construction site. Under these circum- Despite these setbacks, Total has stopped short setbacks, Total
stances, he said, the company cannot resume of withdrawing from the project. has stopped short
work or allow personnel for the Mozambique The company’s spokesman stressed this point,
LNG project to remain on the Afungi Peninsula. telling Upstream that the company “remains of withdrawing
committed” to developing Area 1’s gas reserves
Contract cancellations and building the onshore LNG plant, “when from the project.
Total’s spokesman did not comment directly on conditions allow.” He also said Total would
his company’s relationships with its contractors. “continue to follow the evolution of the situa-
According to S&P Global Platts, the French tion with great attention, in close contact with
firm began reviewing agreements with several the [Mozambican] authorities.”
of its service providers last week, shortly before This stance seems to have reassured the Afri-
issuing declaring force majeure. It is likely to can Energy Chamber (AEC), an industry group
cancel some of these contracts soon, as the dec- that advocates for oil and gas development in
laration gives it the legal right to do so. Africa. “While the force majeure declaration by
Together, the declaration and the review of Total is a legal instrument at its disposition to
service contracts appear to signal that the $20bn procure its objectives and compromises with its
scheme will be on hold for at least a year, with lenders and the government, we firmly believe
first production pushed back to 2025 instead that Total will do whatever it takes to stand with
of 2024. (Total has not commented on its time- Mozambique and its people,” the AEC wrote in
line, and its spokesman only told Upstream that a statement later on April 26.

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